Business Context and Reporting Period
This Form 8-K Current Report was filed by B&G Foods, Inc. on November 6, 2015, covering events occurring on November 2, 2015. The filing primarily details the closing of a major acquisition and the associated refinancing of the company's credit facility.
Key Financial Metrics and Transaction Details
Acquisition of Green Giant and Le Sueur
- Target: Green Giant and Le Sueur shelf stable and frozen vegetable business from General Mills, Inc.
- Purchase Price: $765.0 million in cash.
- Inventory Adjustment: $57.7 million at closing.
- Assets Acquired: Inventory, a manufacturing facility in Irapuato, Mexico, a research center in LeSueur, Minnesota, manufacturing equipment, intellectual property (trademarks, patents), and customer lists.
Debt and Liquidity Position
- Financing Source: Funded via additional revolving loans and $750.0 million in new incremental Tranche B term loans.
- Outstanding Debt (Post-Closing):
- Tranche A Term Loans: $279.4 million
- Tranche B Term Loans: $750.0 million
- Revolving Loans: $100.0 million
- Liquidity: Available borrowing capacity under the revolving credit facility is $398.0 million (net of $2.0 million in outstanding letters of credit).
- Revolving Facility Maturity: June 5, 2019.
- Tranche B Maturity: November 2, 2022.
Material Changes and Credit Agreement Amendments
The company amended and restated its senior secured credit agreement to accommodate the acquisition. Key changes include:
- Incremental Facility: Increased the Tranche B term loan facility from $500.0 million to $750.0 million.
- Interest Margins:
- Tranche A and Revolving loans are priced based on the consolidated leverage ratio (ranging from 0.50% to 1.00% over Base Rate and 1.50% to 2.00% over LIBOR).
- Tranche B term loans carry a fixed margin of 2.00% over Base Rate or 3.00% over LIBOR.
- Financial Covenants:
- Maximum Consolidated Leverage Ratio: 7.00:1.00 for the quarter ending December 31, 2015; 6.75:1.00 for 2016; and 6.50:1.00 thereafter.
- Minimum Interest Coverage Ratio: 1.75 to 1.00 for any four-quarter period.
Management and Personnel Changes
Michael A. Sands, Executive Vice President of Snacks, notified the company of his resignation, effective January 4, 2016, to pursue another opportunity.
Outlook, Risks, and Contingencies
- Transition Services: General Mills will provide transition services for up to 12 months and manufacture certain products for B&G Foods for up to 24 months post-closing.
- Prepayment Penalties: A 1% repayment fee applies if Tranche B term loans are prepaid within six months of funding in connection with lower-cost financing.
- Restrictive Covenants: The credit agreement limits the ability to incur additional indebtedness, pay dividends, repurchase stock, or create liens.
- Future Filings: The company intends to file financial statements of the acquired business and pro forma financial information within the time periods permitted by Regulation S-X.
Investor Verification Checklist
- Verify the pro forma financial impact of the $822.7 million total acquisition cost ($765.0M + $57.7M) on future earnings and leverage ratios.
- Monitor the company's ability to meet the 7.00:1.00 consolidated leverage ratio covenant for the quarter ending December 31, 2015.
- Review the upcoming financial statements of the acquired Green Giant and Le Sueur business to assess historical performance.
- Assess the impact of the resignation of the Executive Vice President of Snacks on operational continuity.
- Confirm the status of the transition services and co-manufacturing agreements with General Mills.